The company released its 2023 annual report and 2024 quarterly report, which was pressured by factors such as terminal storage and other factors compounded the company's 23 annual results.
24Q1 The company's performance improved significantly from month to month. In the AI era, the company's products are deeply in line with high computing power requirements. We are optimistic that the company's performance will pick up at an accelerated pace with the upward trend in the industry, and maintain the purchase rating.
Key points to support ratings
The company's 23 annual results were under pressure, and 24Q1 performance improved significantly. The company achieved revenue of 2,286 billion yuan for the full year of 2023, a year-on-year decrease of 37.76%, realized net profit of 451 million yuan, a year-on-year decrease of 65.3%, and realized deducted non-net profit of 370 million yuan, a year-on-year decrease of 58.11%. In the first quarter of 2024, the company achieved revenue of 737 million yuan, +75.74%/-3.06% month-on-month, realized net profit of 223 million yuan, +1032.86% YoY/+2.88% month-on-month, and realized deduction of 220 million yuan in non-net profit, +74117.63% /month-on-month +2.57% YoY. In terms of profitability, the company's gross profit margin in 2023 was 58.91%, up 12.47 pcts year on year, net interest rate to mother 19.73%, a year-on-year decrease of 15.66 pcts, minus a non-net interest rate of 16.18%, and a year-on-year decrease of 7.86 pcts. In the first quarter of 2024, the company achieved a gross profit margin of 57.7%, a year-on-year +4.41pcts month-on-month, a net profit margin of 30.30%, +25.60pcts year-on-year, after deducting a non-net interest rate of 29.79% and +29.72 pcts year-on-year. The above changes are mainly due to: in 2023, 1) due to customer inventory removal due to falling demand in the global server and computer industry, the company's DDR4 memory interface chip and CPU shipments decreased significantly compared to the same period last year; 2) total return on investment income and fair value changes decreased year-on-year; 3) the revenue share of higher gross margin products such as 24Q1, DDR5 memory interface chips, PCIereTimer, and MRCD/MDB chips increased. The gross margin of the interconnect chip product line was 60.93 %, a year-on-year increase of 6.98 pcts.
The server+AI chip boom is picking up, DDR5 continues to penetrate, and the company continues to consolidate its market position. 1) Research and development: In January 2024, the company launched the DDR5 fourth generation RCD chip, which supports a data rate of 7200MT/S, and has sent engineering samples of this product to major memory manufacturers to help customers develop next-generation memory products. 2) Market side: As DDR5 continues to penetrate downstream, the company expects shipments of DDR5 second-generation and third-generation RCD chips to increase significantly in 2024 compared to the previous year. Among them, DDR5 second-generation RCD chip shipments are expected to exceed first-generation products at 24H1, and DDR5 third-generation RCD chips are expected to be shipped on a large scale starting at 24H2.
Connected products are expected to blossom more, and platform-based design companies will open up room for growth. As of April 22, the company expects the total amount of in-hand orders for PCIe Retimer, MRCD/MDB and CKD chips delivered in 24Q2 has exceeded RMB 90 million. 1) PCIe etimer: 24Q1's PCle Retimer chip shipments are about 150,000 units in a single quarter, more than 1.5 times the product's annual shipment volume in 2023; 2) MRCD/MDB: Server high-bandwidth memory modules with the company's MRCD/MDB chips have begun large-scale trials at mainstream cloud computing/Internet vendors at home and abroad. In 24Q1, the company's MRCD/MDB chip sales exceeded RMB 20 million for the first time in a single quarter; 3) CKD: In April 2024, the company took the lead in trial production of CKD chips in the industry, and large-scale shipments are expected to begin in 24Q2.
valuations
Considering the recovery in demand for storage and data centers, the company is expected to be driven by multi-dimensional growth. We expect the company to achieve revenue of 43.54/62.02/7.777 billion yuan in 2024/2025/2026, and realized net profit of 14.77/22.88/2,851 billion yuan respectively, and EPS of 1.29/2.00/2.50 yuan, respectively, corresponding to 2024-2026 PE 37.3/24.6/19.3 times, respectively. Maintain a “buy” rating.
The main risks faced by ratings
The recovery progress of the storage market falls short of expectations, the DDR5 penetration rate falls short of expectations, the development of new products falls short of expectations, and the international environment is unstable.